Virgin Mobile moves into the 1950’s… strategically speaking

Like most, I’m a fan and customer of Virgin brands, though I’m not a customer of Virgin Mobile. The main reason is that under advice from a financial planner, I stupidly bought Telstra 2 shares when they floated. If you follow the market you’ll know they have never been anywhere near their float price and probably never will be again.

So I continue to use Telstra in a feeble attempt to contribute to my annual dividends and prop up the share price. Weird logic, I know.

And I don’t really want to be a critic of Virgin Mobile, given its recent advertising success. But I was surprised, as were others I spoke with, by this headline in last week’s Marketing Magazine email:

Virgin Mobile unveils new brand identity and strategy with focus on customer retention

A strategy for customer retention? I thought I was reading a typo. The purpose of business has and always will be, “to acquire and retain customers profitably”. Professor Theodore Levitt the famous management and economics guru first articulated this in the 1950’s.

And the purpose of all marketing is to either acquire new customers or retain existing ones profitably. Your marketing messages may be designed to influence an attitude, or get a sale, or create publicity, but there are only two ultimate objectives – acquire or keep customers.

I’ll try not to be too scientific. It’s the customers who pay our salary – but we often forget that fact.

I don’t know any company that doesn’t have a strategy for retaining customers. You don’t have a business without customers. You can charge what you like, but if nobody buys, you don’t stay in business very long. Simple really. And if you do have customers and you stuff them around, you can go broke. Look at the problems facing Vodafone for example.

The article went on to explain: “Virgin Mobile Australia has unveiled the most significant change to its brand in its 12-year history. A new strategic direction sees the telco grow into maturity and focus primarily on customer retention rather than acquisition, through a new brand identity and theme for campaigns using the keyword ‘Irresistible’.”

I’m not going to get involved with the campaign theme. But Virgin Mobile has one of the best Net Promoter Scores of any telco. It has an army of customers who in marketing parlance are fans or advocates. And every marketer and salesperson worth their salt knows it’s always cheaper to sell to someone you know (your customer) than to someone you don’t (your prospect).

The easiest way to grow the business even further, while focusing on retention, is to establish a referral campaign.

Reward these advocates for introducing new customers – it will help retention and grow the business. It’s strange but most marketers don’t have a referral strategy, yet referrals are the best new business leads you can have, in whatever industry you work.

I’ve worked on many referral programmes over the years and when managed well, they can be highly profitable. About a decade ago, Dingo Blue, the now defunct Optus-owned telco for the bottom end of the market, ran one of the telco industry’s best online referral programmes. It was called the Dingo Blue Breeding Programme. Here’s an image of the second version after the first round of testing:

Sergio Zyman, the marketer who grew Coca Cola when nobody thought the market could grow any further, is also author of a couple of books – The End Of Marketing As We Know It and The End Of Advertising As We Know It. In layman’s terms he says “the purpose of marketing is to sell more stuff to more customers more often for more profit.” It’s not rocket science – it doesn’t need vast offices of strategic planners.

Flog more stuff to more people more often for more profit

We’ve now had over 50 years of marketing degrees at university, 40 years of advertising certificates at TAFE and 30 years of direct marketing courses. Maybe it’s taking a while for the marketing fundamentals to sink in?

No business will survive if it doesn’t follow the fundamentals. Keep topping up the bucket with new customers and look after those already in the bucket, to minimise the number who slip out the hole in the bottom – metaphorically speaking.

I think it was Gordon Grossman, former head of Reader’s Digest who said it first: “If your customers don’t make you rich, who will?”

Speaking of which, I’m off to make some phone calls on my Telstra account – I need a strong dividend this quarter…